Cheaper cable and controlled content

About the Author

Cable TV is now at the center of two simmering controversies.
The first concerns content: How can parents protect their kids from
inappropriate TV programming? The second involves competition: what
to do about local rules that impede telephone companies from
competing with existing cable TV providers.

These two policy debates have largely been kept separate from
each other, not least among conservatives. Pro-family groups focus
on the content debate, rarely mentioning competition, while
pro-market groups push for competition, without reference to the
content debate. However, like so much else in today's converging
telecommunications world, the controversies are linked.

Competition may be good family policy as well as good economic
policy.

TV programming has been a front-burner issue since Janet
Jackson's wardrobe "malfunctioned" at the 2004 Super Bowl. However,
most TV programming today is on cable, where the FCC (for good
constitutional and policy reasons) has no authority to impose
fines. The debate has now turned to the question of how best to
help parents and other cable customers exercise more control over
what appears on their TV sets.

Toward this end, many have urged cable companies to let cable
consumers purchase channels individually ("a la carte"), rather
than in the pre-selected "tiers" offered by most providers today.
Most cable firms have resisted this, arguing that a la carte
pricing would reduce advertising revenue (since the potential
audience for each channel would be smaller), resulting in higher
rates and less program variety. An FCC study last year strongly
supported this contention. However, after a change of leadership,
the FCC last month reversed itself and issued a contrary study
concluding that a la carte would work. Which is right?

The answer is unclear. What is clear is that politicians and
regulators are poorly positioned to find out. Whether a la carte
pricing would work is a question much better answered in the
marketplace -- with rival firms testing alternative ways to serve
consumers.

This is where the competition debate comes in. In recent months,
Verizon and AT&T have launched video service in several cities,
using advanced digital technologies that let them deliver TV
signals over existing phone lines. The new competition promises to
jolt traditional cable providers, presenting a challenge unlike any
they have faced before.

However, under current law, new cable competitors must receive a
franchise from local regulators before offering service. There are
some 8,000 local cable authorities, meaning nationwide service
could be delayed for years. So far, the debate over competition has
focused on the economic effects, primarily reduced cable rates. A
study by Criterion Economics estimates that, if this kind of
competitive pressure existed everywhere, rates would drop 15
percent nationwide, saving consumers more than $5 billion.

But new competitors could also make it easier for parents to
control the content of their TV programming. By its nature, the
digital technology used by telephone companies makes it easier for
viewers to decide what they see and when they see programming. And,
as newcomers to the market, the telephone companies are
unencumbered by past business practices, making pro-choice policies
easier to implement. Although neither firm now offers a la carte
channel selection, AT&T has said it would like to offer its
customers that option. Moreover, both Verizon and AT&T embrace
"choice" as an integral part of their marketing strategies --
providing a way to differentiate themselves from the existing cable
providers.

Next week, the House Commerce Committee may consider a bill by
Chairman Joe Barton, Texas Republican, to speed the advent of cable
competition by allowing competitors to obtain nationwide franchises
instead of local ones. That's a welcome step forward. However, as
now written, that legislation also adds more regulation, most
notably provisions to give the FCC new power to regulate Internet
providers.

It would be far better simply to eliminate franchise
requirements cleanly, and across the board, without additional new
regulations. Such a step would score a rare policy twofer: helping
American families save money on their cable bills, while at the
same time empowering them to control cable content within their own
homes.

James
Gattuso is a research fellow in regulatory policy at
The Heritage Foundation, a Washington-based
public policy research institute.